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Stock Market Volatility: Acting vs. Reacting

Market Sentiment Shifts as Treasury Yields Cross 3%

-Wall Street Journal April 26, 2018

It’s in the news, in the headlines, and more than likely, in your portfolio. Stock market volatility, for any investor, can be worrisome. But it doesn't have to be. Something I always like to remind my clients of is that it is better to have a plan of action versus a reaction. This is something we like to call, active risk management.

Evaluating Risk

No matter what the investment, you probably took some kind of risk evaluation survey before investing. It’s important to note that there is some level of risk involved in every investment decision you make, big or small. The real question to ask yourself is, is anything being done to manage your risk?

What is Active Risk Management?

Simply put, active risk management is having a plan. A plan to monitor and minimize your risk. In addition, it is making changes to your portfolio when necessary to reduce your downside exposure whenever appropriate to do so. It is the difference of having a passive portfolio and one that is managed in a way that can reduce the risk investments pose through a defined process with laid out, repeatable, steps.

The Need for Risk Management

Risk management is necessary for a number of reasons. One exceptionally important one, is that it takes the emotions out stock market volatility. When you catch wind of poor performance, it is easy to let your emotions get the best of you and make rash decisions. Active risk management provides you with confidence, knowing your investments are in good hands.

Risk management becomes exceptionally important when you enter retirement. Market volatility combined with regular withdrawals can make market losses significantly harder to correct. Having a financial professional to actively manage your portfolio can better prepare you for market volatility during your retirement years.

Market Downturns are Inevitable

As any investor knows, at some point, the market has to come down. Market downturns are inevitable; from changes in foreign currency to our own recessions, no one is safe from a downturn. The key here is to be prepare for it.

An actively managed portfolio is the first step. It offers downside strategies that may help and helps to reduce losses incurred during these periods of time.

Knowing that your investments are being monitored and managed when things go sideways may be the greatest asset of all. To learn more about why active risk management is necessary, get a copy of our free brochure here.

Disclosure:

The views stated in this letter are not necessarily the opinion of Cetera Advisors LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. Investors should consider their financial ability to continue to purchase through periods of low price levels. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be profitable. Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing. Exchange traded funds (ETFs) and mutual funds are sold only by prospectus. Investing in ETFs and mutual funds is subject to risk and potential loss of principal. ETFs incur trading and commission costs similar to stocks and frequent trading can negate the lower cost structure of an ETF. There is no assurance or certainty that any investment or strategy will be successful in meeting its objectives. Investors should consider the investment objectives, risks and charges, and expenses of the fund carefully before investing. The prospectus contains this and other important information about the fund. Contact your registered representative of the issuing company to obtain a prospectus, which should be read carefully before investing or sending money.

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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by a third party author to provide information on a topic that may be of interest. The third party author is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

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